Finding a great small-cap stock to buy isn’t always easy. We know that, over the long run, small-cap stocks as a whole outperform large-cap cousins. But that’s on an indexed basis, and picking individual stocks poses a substantial risk if you pick them wrong.
These seven small-cap stocks, though, represent the best of the bunch. Each combines forward-looking goals to capture future trends and decent financial strength today. This ensures that these small-cap stocks remain viable despite economic pressures and costly R&D management while setting each up for massive returns as early as 2024.
If you want to capture small-cap upside safely, stick with an index like iShares Micro-Cap ETF (NYSEARCA:IWC). But if you prefer picking your own, these seven small-cap stocks are your best bet for 2024.
Aehr Test Systems (AEHR)
Semiconductor stocks were hot this year as companies like Nvidia (NASDAQ:NVDA) and ON Semiconductor (NASDAQ:ON) fought for market share. As large caps like these captured investor attention and headlines, small-cap stocks fell from the spotlight. Likewise, much of the industry focus centered on who would be the top dog emerging victorious in the semiconductor industry. But Aehr Test Systems (NASDAQ:AEHR), a small-cap stock offering testing equipment for semiconductor devices, is set to succeed no matter who wins the semiconductor arms race.
The mechanisms behind Aehr’s test systems are complex but rest assured, they’re critical to ensuring the reliability and quality of semiconductors, especially as they become more advanced. Aehr’s customer base is a who’s who of semiconductor stocks, including Samsung, Texas Instruments (NASDAQ:TXN), and more. What’s more, Aehr’s testing systems are a core component of some of the biggest emerging tech trends, including self-driving cars, 5G infrastructure, and data center expansion.
Aehr’s recent earnings report points to strength and resilience moving forward, as the company posted a 93% year-over-year revenue jump and $0.16 EPS compared to just $0.02 the previous year.
Small-Cap Stocks to Buy: AST SpaceMobile (ASTS)
Elon Musk’s SpaceX might be the biggest name in satellite-enabled connectivity. But, since retail investors can’t directly buy a stake in SpaceX, look to small-cap stock AST SpaceMobile (NASDAQ:ASTS) to round out space stocks in your portfolio. Less Internet-focused than SpaceX, AST SpaceMobile seeks to expand mobile phone coverage via satellites in low-connectivity markets. With so few competitors in the space (pun intended), ASTS is effectively building a new market and could emerge as the AT&T (NYSE:T) of space within the next decade.
Speaking of AT&T, AST SpaceMobile is working directly with the legacy telecom company to test and validate its systems. Last quarter, AST SpaceMobile completed the world’s first 5G audio call between standard cell phones via low-earth satellite – supported by AT&T. If a telecom giant as large as AT&T is buying into ASTS’ plan, then there’s a definitive future for the small-cap space stock. This initial testing support could pivot into a full strategic partnership as ASTS irons out the kinks – sending this small-cap stock stratospheric.
Ginkgo Bioworks (DNA)
Ginkgo Bioworks’ (NYSE:DNA) mission might sound like sci-fi, but this biotech stock is on the cutting edge of healthcare. The company works within the “synthetic biology” space, creating custom biological organisms from scratch for various purposes. While that may trigger thoughts of cloning labs or Jurassic Park, the reality is less dramatic – though no less revolutionary.
Ginkgo Bioworks’ custom-designed biologic solutions include novel proteins for testing, enzyme creation to improve biotech applications, and even improved fermentation platforms for beer brewing. Since Ginkgo’s applications are so wide-reaching, they effectively assure a space within biotech as other firms leverage its tech when testing and developing their therapeutics.
This small-cap stock has dwindled recently, and management attributes that to COVID testing contracts fully evaporating and economic conditions creating a financial crunch for the company. While there may be continued short-term pain ahead, this small-cap stock is priced to buy considering its long-term potential.
Small-Cap Stocks to Buy: Enovix (ENVX)
This year marked innovation within the lithium battery space, mostly focused on firms like Tesla (NASDAQ:TSLA) cutting rare earths from from the equation to improve sustainability. But Enovix (NASDAQ:ENVX) has been quietly creating a revolution for lithium batteries. The company restructured lithium-ion batteries using silicon in a way that’s ultimately more sustainable, efficient, and cheaper than legacy batteries.
The company is currently pivoting from an R&D focus to scaling its market reach across electric vehicles, wearables, and cell phone platforms. The most recent quarter marked some important milestones for the small-cap battery stock, as its battery is now part of an FDA-approved vital sign monitor. The company also began supplying the US Army with customized batteries to facilitate the services’ central power source wearables testing.
Revenue remains low while testing and marketing expenses make profitability nonexistent. Still, the company is at an important inflection point as it moves to market. Recent developments bode well for its future as Enovix finds its fit within the broader battery ecosystem.
Hims & Hers Health (HIMS)
A post-pandemic trend that’s here to stay is telehealth. Providers and patients are increasingly leveraging technology to save time and cut costs for routine interactions, including mental health assistance. As reported recently, up to 25% of adults use telehealth platforms, indicating that the preference for at-home digital care is here to stay. Hims & Hers Health (NYSE:HIMS) is one small-cap stock positioned to capitalize on that market trend.
HIMS offers telehealth solutions for some of the most sensitive medical topics, including sexual health, hair loss, and mental health. These effectively serve as a foothold for the company to continue expanding. The company proved that this operational model worked. Establishing a presence for the most sensitive topics (hair loss and erectile dysfunction) let them build a base to pivot into telehealth therapy and other mental health services.
Where HIMS goes next is tough to say, particularly as healthcare heavy-hitters are increasingly developing their telehealth solutions. Still, HIMS’s current market is effectively cornered, assuring its strength as a small-cap stock.
Small-Cap Stocks to Buy: RocketLab (RKLB)
RocketLab (NASDAQ:RKLB) is a small-cap stock set to capture part of the projected $1 trillion space industry. RKLB is unique among other small-cap space stocks as the firm is more mature, offering a tested and proven product that is seeing increased demand. Specifically, the firm is working to bring reusable boosters to market, a goal proving viable after a successful August rocket launch. The company is also chasing engineers’ white whale – commercialized hypersonic flight – via its HASTE program. Between the two ambitious plans, RocketLab is a giant among small-cap space stocks.
The company is also financially solid, which is equally rare for small-cap stocks within the industry. Its most recent report posted a 9% year-over-year revenue jump, and its small margin compression was due to a one-time event. Likewise, management projects revenue to stay steady while margins improve through both Q4 2023 and 2024’s first quarter.
Recursion Pharmaceuticals (RXRX)
Recursion Pharmaceuticals (NASDAQ:RXRX) hit headlines hard earlier in the year as artificial intelligence giant Nvidia announced a $50 million direct investment in the biotech stock. Since then, though, this small-cap stock’s per-share pricing has returned to previous pricing. Still, nothing materially changed since Nvidia decided to invest, and RXRX’s prospects remain bright.
The company leverages artificial intelligence to identify relationships and trends within its genetic dataset. In simple terms, this lets other biotech companies accelerate drug discovery to bring therapeutics to market faster and more safely. In essence, the company turns a process as complicated as finding a needle in a haystack into an automated, autonomous, and more efficient process.
And, since RXRX’s platform is usable by many existing and future biotech firms, its success isn’t contingent on hoping a specific drug or therapeutic pans out – instead, it can capture hundreds of customers within the existing market.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.